Why Obama will okay the Keystone pipeline

Keystone XL pipeline odds of approval are up, but rocky steps ahead

On the main floor of Capitol Hill’s stately Russell building, down the white-marbled hall that leads to the offices of some of the most powerful men and women in the United States, Senator Lindsey Graham is batting for Canada and for the Keystone XL pipeline.

“I have been to the oil sands,” the Republican from South Carolina, a big producer of Earthmover tires used in Alberta’s oil sands trucks, said in an interview this week.

“To not make this decision, to deny this partnership, to stop the pipeline, would be one of the most illogical and irrational decisions any president has ever made in modern times. I don’t think he can do that.”

On the other side of the Capitol, in the bustling Rayburn building that houses the offices of the lower house, Congressman Gene Green, a Democrat and a lifetime member of the Sierra Club, said the environmental lobby’s campaign is more politics than substance and wants Keystone XL to be approved.

Three refineries in his district are eagerly awaiting Canada’s secure oil so they can reduce reliance on imports from abroad. He, too, has visited the oil sands.

“I was pleasantly surprised,” he chimed. “Sure, you have a monster hole in the ground. But then I also saw reclamation where there was strip mining. It was similar to the rest of the landscape. And then I went south to the in-situ [projects], where there is more traditional oil production like we are used to in Texas.”

But a few blocks away closer to the White House, a back lane leads to a refurbished architectural studio, the headquarters of 350.org, a grassroots group that has taken to the streets the fight against Keystone XL. Jason Kowalski, the group’s policy director, is convinced President Barack Obama will stand by the environmental movement that helped re-elect him and reject Canada’s “dirty oil.”

This is Obama’s first big chance to show us that he is really serious

“It’s not very often that folks like Barack Obama get the chance to make a big decision like this,” the young activist said. “Here is a guy that people feel a connection to … and here is a chance to go ‘Yea or nay, more carbon or less carbon, more climate change or less climate change.’ This is his first big chance to show us that he is really serious.”

They are some of the voices filling the streets, the offices, the power rooms of Washington as the president gets ready to take a stand on whether to give a permit to the pipeline between Alberta and the U.S. Gulf — after twice rejecting it and causing Canada’s mad scramble to find new markets, particularly China.

The project was first submitted for regulatory approval in September 2008, was delayed in November 2011 and denied in January 2012, when the president was in the thick of his re-election campaign and environmental activists threatened to pull their support. TransCanada resubmitted its application in May 2012 and has since started building the southern portion.

With the election done and the fiscal cliff debacle largely over, the decision is in the queue to be Washington’s next big battle — one that will go a long way to framing the future relationship between the two countries.

After more than four years of emotional debate, from Capitol Hill to the White House, from regulatory hearings along the pipeline route to the Nebraska state legislature, from Canada’s oil industry to pipeline trenches in the deep south, Keystone XL has assumed near-biblical proportions.

From a public policy and idea standpoint, I equate it to construction of the Hoover Dam

Opponents blame the pipe for everything that is wrong with the climate — from Superstorm Sandy to droughts in the U.S. midwest. Supporters see it as the way to salvation from the hostile Middle East.

“The pipeline project itself is as significant as anything as we have done in our country in a very long time in terms of infrastructure development,” said a lobbyist in Washington for proponent Trans­Canada Corp. who asked not to be named.

“From a public policy and idea standpoint, I equate it to construction of the Hoover Dam,” he said, referring to the hydro project in the Black Canyon of the Colorado River constructed during the Great Depression. “It is a significant matter of public policy.”

The latest odds? President Obama will approve it — but it will take longer than Canadians expect and the process will be rocky.

The president’s main motivation will surprise many: He wants to preserve good ties with Canada. He also believes Canada’s oil sands will be produced and exported, if not to the U.S., then to Asia, well-connected observers and political insiders said in interviews this week.

The decision also gives Mr. Obama an opportunity to show he can work with Republicans and brings additional benefits in terms of energy security.

As Congressman Green put it: “I am pretty sure he will approve it. It would be the first time ever that we decide not to do something with Canada.”

And yet the politics around it remain volatile and another burst of opposition could mean another delay, even if the facts suggest it should be approved, said a policy advisor who asked to remain anonymous.

“The administration understands that this oil is not going to stay in the ground, and that the carbon argument is not nearly as factual as it is emotional,” the advisor said.

It would be the first time ever that we decide not to do something with Canada

Because the road ahead involves several steps, a decision is unlikely before June and could take until September. And it’s a decision President Obama wants to own.

The first step is his State of the Union Address on Tuesday, when he is expected to talk about how he plans to address climate change. After introducing the subject in his Inaugural Speech, the president is expected to be more specific about tough new regulation to curb carbon emissions in the power sector, a move that is opposed by the coal industry.

While some may interpret the tough talk on carbon as bad news for Keystone, his game plan could be the opposite. Being tough on coal-fired power plants “is going to be the build-up to making a positive decision on Keystone,” the policy advisor said.

The unrecognized silver lining in the recent appointment of climate change hawk John Kerry as Secretary of State is that he has enough environmental movement legitimacy that he can defend a Keystone XL approval, the advisor said.

Canadian Foreign Minister John Baird met Friday with Mr. Kerry, his U.S. counterpart, to discuss various foreign issues, including the pipeline. But Mr. Kerry wouldn’t publicly tip his hand on what he thinks of the project.

The next big event is the anti-Keystone demonstration on Feb. 17 — the day before President’s Day. Mr. Kowalski expect tens of thousands of activists to surround the White House in “the biggest climate-change demonstration in the history of the United States and Canada.” They will ask the president to shut down “the climate-killing Keystone XL pipeline once and for all,” he said.

The next major event is in the regulatory process — a draft environmental impact assessment for the State Department. It will be followed by a comment period and a final report.

The State Department will then make a recommendation to the president that will not be made public. President Obama is expected to take anywhere between 30 and 90 days to hand down a national interest determination.

There are other levers that give pipeline supporters hope. The pipeline enjoys strong support in both houses of Congress.

Senator Graham said 52 Senators have signed a letter urging President Obama to OK the project. With his support, the tally rises to 53 out of 100 seats in the Democratic Party-dominated upper house.

Fifty-three Senators agreeing on anything in this political environment is pretty consequential

“Fifty-three Senators agreeing on anything in this political environment is pretty consequential,” he said. “And I am hoping that this letter … will give the President some political manoeuvring to get this done.”

The other lever are trade unions, the other major Obama constituency that also worked on his re-election. They are behind the project because TransCanada has signed labour project agreements, making it one of the few in the U.S. stepping up with such commitment.

“I would say that two things continue to make us politically viable: the support we have in Congress, and the support we have with labour,” the TransCanada lobbyist said. “Without those two things, we would be nowhere. I think we are a force to be reckoned with.”

While the president has taken ownership of the decision, there are legislative vehicles to push project approval if he doesn’t come through, such as passing legislation to approve the pipeline, Congressman Green said. It’s a last resort and he hopes Congress doesn’t embarrass the president by taking away his authority to decide.

Meanwhile, Canada could help itself by renewing a conversation with the U.S. on a joint plan to reduce carbon emissions, said the policy advisor.

“In the context of Keystone, it would make it easier for the U.S. to approve it if [Canada] were able with some legitimately to say, ‘We have a plan.’ ”